The Budget Reform Pivot

An honorable shutdown exit for the GOP and President Obama.

Updated Oct. 6, 2013 6:11 p.m. ET

Both parties are digging in deeper over the budget impasse, and the likelihood now is that the partial government shutdown elides into the debt-limit deadline later this month. Neither side may be listening at the moment, but there is a political exit from this mess that has the added advantage of helping the country.

The exit ramp is for both sides to pivot from the ObamaCare stalemate to negotiations over tax and entitlement reform. The
Ted Cruz
Republicans would have to give up their mission to defund the Affordable Care Act with only one house of Congress. President
Obama
would have to show he's willing to negotiate with Republicans over the debt limit. Both sides would step back from the brink and give themselves a chance for some long-term political gains.

The advantages for the Republicans are obvious. The Cruz faction has paraded the GOP into a shutdown without a strategy for getting out, as even some of them are figuring out. Their strategy of "keep it shut" is a dead end. The political impasse is doing no good for the Republican image, and the longer it continues the more it is putting at risk in 2014 the swing seats that provide its House majority.

Mr. Obama is simply not going to delay or defund his signature legislation. And the political irony is that instead of learning about the glitches and problems of the health law's rollout this week, the public is hearing only about the GOP willingness to punish other Americans to get rid of ObamaCare. The Cruz Republicans have helped Mr. Obama change the subject from his faulty program to their political tactics.

By turning to a reform negotiation, Republicans would have the chance to achieve at least some of their policy goals. Those include a down payment on entitlement reform, including significant changes in Medicare. Republicans won't get Paul Ryan's superior 2011 reform, but they might get increases in the retirement age, the end of first-dollar Medigap coverage, and other changes that over time add up to real fiscal savings. They might even get the Keystone XL pipeline or repeal of the medical-devices tax in the bargain.

ENLARGE

President Barack Obama
Agence France-Presse/Getty Images

Such a negotiation is also the GOP's best chance for tax reform before 2017. The obstacles will be high—and insuperable if Mr. Obama insists on $1 trillion in additional revenue on a static basis. But Mr. Obama is on record as favoring a cut in the corporate tax rate, and Finance Chairman Max Baucus also wants to leave the Senate with a reform legacy.

Progress on either front would show swing voters that Republicans are able to govern without maximalist demands. They could point to progress on reducing debt, and above all they would help the economy and thus show that their policies raise middle-class incomes. Regarding ObamaCare, they could rightly say they fought as hard as they could to delay it, but that to replace it they will need more Republicans in Congress. This could be a major campaign theme in 2014.

As for Mr. Obama, he'd benefit immediately by stopping any damage from the shutdown and the threat of a debt default. He might think Republicans will blink on the debt limit, but that's what he thought about a shutdown. He also might think he can blame Republicans if the worst happens, but any economic harm will mar his final term.

Mr. Obama's left wing won't like entitlement reforms, but it will like easing the sequester spending caps on education, welfare and public works. If Democrats really believe that public spending is crucial to economic growth, they'll also get more spending immediately in return for long-term reforms. Without a larger budget deal, Democrats face three more years of ever-tightening discretionary budget caps.

The biggest upside would be the growth impact of tax reform. On the economy's present growth trajectory, Mr. Obama will finish his second term with lower real middle-class incomes than in 2009. He'll be the toast of the hedge-fund class but have increased income inequality. If he wants a second-term economy like Reagan's or Bill Clinton's, he needs bipartisan cooperation for pro-growth reform.

***

We realize this is all a political long shot. The Cruz faction is a rump caucus, but it will have more influence the more GOP leaders fail to deliver any reform. Mr. Obama can reduce its influence if he uses this moment as an opening for compromise rather than to humiliate House Speaker John Boehner into surrender or a debt-limit crack-up. On the other hand, Mr. Obama may welcome a default if his real political goal is to tar the GOP as irresponsible and take back the House in 2014.

There's also the question of whether Mr. Obama is even capable—temperamentally—of negotiating such a compromise. He is so sure of his own superior political virtue that he disdains meeting other politicians halfway (foreign dictators perhaps excepted). We'll find out soon enough, but he can't say he wasn't offered the opportunity.

What if BO does not negotiate --The bond market is telling us that there is enough revenue coming into Treasury to pay the debt, pay the military and pay Social Security --How will the Professor of Apocalypse explain that?

"And the political irony is that instead of learning about the glitches and problems of the health law's rollout this week, the public is hearing only about the GOP willingness to punish other Americans....The Cruz Republicans have helped Mr. Obama change the subject."

I keep reading this! and ok, while it's too bad there isn't more attention being paid to the horrendous Obamacare rollout (maybe "limp-out" would be a better term.) I'm not worried.

the govt. shutdown is going to end soon (I give it another week tops), and Obamacare is going to continue to be horrendous. there will be plenty of time to talk about that before the midterm elections.

Your "solution" is nonsense. Obama's whole purpose is to damage America, and in accomplishing that, he doesn't care who gets hurt. He will not negotiate on anything, not even the brand of toilet paper in the restrooms. He is a totalitarian mentality, and has been from the start. That's why his Senate voting record was to the left of the self-described socialist Bernie Sanders. The WSJ and countless others have never understood who this man is, a Saul Alinsky radical. Most are so seduced by the idea of a black man in the White House that they have lost all ability to reason. Any Republican who had done half of the illegal things Obama has done would have been impeached by now.

This is America's second civil war. If the Republicans cave while Obama refuses to negotiate anything, they are finished, and we will have a leftist whacko federal government in America forever, just as we already do in California. The soft tyranny we are moving into now will then become a hard tyranny.

The impasse we have now is the hill to win on or die on. If the Republicans give in now, it's over. It may be over anyway.

Those "hot potatoes" having to be dealt with later on will never be dealt with. "Later on" never takes place. The fact of the matter is both parties like to spend and the spending continues to grow the bureaucracy to the point where nothing will shrink its growth.

Not to sound cynical, but the only thing that will kill this bureaucratic disease is the marketplace. Upticks in interest rates will balloon the national debt to the point where raising the debt ceiling will be a topic of conversation on a bi-weekly basis.

We're beyond the point of rationality and responsibility as it pertains to fiscal policy. We have looked into the abyss and have seen the devil, and the reflection is a picture of ourselves.

Single-minded focus on ObamaCare will freeze these talks solid: the administration, already defensive and skittish over the logistical problems anticipated and now being encountered with ACA implementation, that will persist for many months, will not give an inch on this subject, from pure face-saving obstinacy. The damage of a shuttered government, even if Boehner can sell a way to service debt by the 17th while still keeping the pressure on by keeping government closed, will accumulate -- and BOTH Republicans and Democrats will suffer electorally. This inability to transcend differences and govern will be remembered.

Focus on what we've sought engagement on for YEARS as the prize: entitlement and tax reform talks, that must begin soon with solution framework timing that dovetails with FUTURE debt-limit boundaries. No blue-panel commissions, such as Simpson-Bowles, whose recommendations BOTH sides are free to discard, and did: DIRECT talks between Congress and the administration, coordinated by the White House and with material participation by Mr. Obama.

Surely this is more important than single-minded hondling with Persian rug merchants over Home Depot nuke kits.

Whether to begin with the pathetic naiveté or the bracing cynicism of this op ed is a dilemma. The trashing of the GOP efforts in order to lay out a WSJ wish list is mind numbing. And to think for one moment that this sage advice will be heard over the trashing comments on Cruz and the GOP is totally ridiculous. The only words of reality are stated in the last paragraph which sums up perfectly what Obama and his liberal cohorts have in mind. Why would they take conservative advice now when their "take no prisoners" full speed ahead agenda is working so well for them. I am disgusted with them all and sorely disappointed in the focus both in the press and in DC on the political game over the path we are on to our fiscal and therefore existential destruction as a nation.

After making me wade through those words, the WSJ tells me that there is not a chance in the world that Obama would go along with it. As an aside, the Iranians say Obama made five call to them. He had only one meeting with the GOP.But how about this: The GOP should take one more stab getting the Feds going. They should pass a Balanced Budget. So If the Treasury says next years expected tax revenues equals $2 trillion then that is the limit for spending. The GOP should budget explicit monies for defense and law & order and the other line items until they get to Obamacare - there the spending limit should be $1.00 with the provision that no one is exempted from the law and the entire law is postponed for a further year until all the bugs are removed. (sue the software providers for the re-coding costs). Then the GOP has the time to circle the wagons and win 2014. Then let see if Harry is still willing to prevent kids from getting cancer treatment..

"There's also the question of whether Mr. Obama is even capable—temperamentally—of negotiating such a compromise. He is so sure of his own superior political virtue that he disdains meeting other politicians halfway"

It's not a question, its fact, Obama is so full of himself, he doesn't feel the need, each failure gets spun as somebody else's fault. Look at the current debate, Obama won't even talk to them, yet its still the Republicans fault.

"Progress on either front would show swing voters that Republicans are able to govern without maximalist demands. They could point to progress on reducing debt...."

The Journal editorial staff should stop lying about the national debt.Just stop it.There has been no progress in reducing the debt.You cannot say "progress on reducing the debt" if you mean that the debt will grow more slowly.You are turning the English language upside down.Where do you think we are: Oz?Neither the Dems nor the GOP have any intention whatsoever to reduce the debt in the next 20 years.None.Zero.Obama, Ryan and the Journal intentionally use deceptive language to make people outside the Beltwaythink they want to "reduce" the national debt or, in Obama's and Ryan's words, "pay down the debt."There is only ONE way to reduce the balance of the national debt: by using some or all of a federal government SURPLUS to reduce the balance.But the devious skunks who run this country want you to think they want to reduce the debt, so they say "reduce" or "pay down" the debt when they REALLY mean "reduce the national debt as a percentage of GDP".Any DC bozo can produce hilariously optimistic projections showing that if GDP grows robustly each yearfor the next 20 or 30 years, then debt/GDP will decline and return to normal levels.But guess what?Their projections are worthless, crafted only to deceive the ignorant voters outside the Beltway.And in any event, those who own Treasuries will not accept GDP units for payment of principal or interest.This is my last Comment on these pages.I am sick and tired of the nation's largest business paper playing games with words.This country needs a conservative national newspaper that understands why it is fundamentallyirresponsible to operate the federal government at a deficit decade after decade.The Journal is not that paper.I am cancelling my Journal subscription after reading it for 46 years.I will miss the comments made by other readers as well as the Letters to the Editor.They were often insightful and I learned more from them than from the high-priced editors and columnists.I will not miss the liberal nonsense spewed daily by the Journal's Washington Bureau (where thecurrent Executive Editor of the New York socialist rag got her start) nor will I miss the obvious liberal bias of the Journal's News staff nor will I miss the "reduce the deficits and increase the national debt" philosophy of the paper's editorial crowd.When interest rates return to normal levels, the interest payments on the national debt will exceed 30% of federal revenues.Good luck.

It 's wrong to say that Mr. Obama and his handlers "may welcome a default." There can be no doubt about it. They do welcome a default. The Democrat Party has every incentive to do whatever it takes and move the goalposts as far as necessary in order to achieve default. It is hard to imagine something that will serve their political interests more.

The suggestion by the WSJ editorial staff that some sort of compromise would include their standard (if accurate) pro-growth shibboleths is laughable, as well. Given the burgeoning rate at which the populace is dependent on government largess for their sustenance, the economy is performing exactly as the Democrats would want it to as is. Growth would undermine progress toward the sort of US society that serves their interests best.

There is sound reason, based on the ideology that has animated Democrat Party foreign policy since at least the McGovern era, to negotiate with dictators who are implacable enemies of the US. There is absolutely no reason for them to negotiate with Republicans, let alone make concessions that would lead to the sort of economic growth that would strengthen the private sector and run the risk of creating economic actors independent of government.

From the Op-Ed - "On the other hand, Mr. Obama may welcome a default if his real political goal is to tar the GOP as irresponsible and take back the House in 2014."

What do you mean "if"? Of course his goal is taking the House and retaining the Senate in 2014. And there's no way on earth he will negotiate with Boehner and the Republicans. He's all in for a final two years of totalitarian rule.

The Republicans better reel in Sen Cruz and get the debate shifted to the debt ceiling pronto. Obama will flounder on the rocks of that debate . . . the majority of Americans (maybe a small majority) are appalled at the state of our financial house and Obama is oblivious to it.

Their economic policies meant to give a greater distribution of wealth and "strengthen" the middle class have only done the opposite. They have stagnated middle class wages, meanwhile sending the stock market soaring, greatly expanding the very inequality that they sought to destroy.

Taxing the rich to feed the poor only works in 13th Century literature. In the real world it ends with less opportunities for job creation and growth. Clinton said he would put everyone in a house, result is the 2008 financial collapse sending home values tumbling. Obama said he would give everyone healthcare, result is a drastic increase in part time jobs to the detriment of full time, stagnant wages, higher premiums, and elite doctors walking away from their practices.

Unfortunately we've been walking down this road for 80 years, and it seems that until it blows up, Liberals will continue to march us down this path.

<<They might even get the Keystone XL pipeline or repeal of the medical-devices tax in the bargain.>>>

Those would be good tactical things to shoot for. Wonder if they might also get a repeal of the employer mandate, which even a lot of Democrats aren't comfortable with. Or at least raise its threshhold to 100 employees, which would give small businesses more elbow room.

The article is completely right that Obama isn't going to permit defunding or delaying Obamacare. He's also not going to agree to raise the Social Security / Medicare eligibility age as part of this deal. Those "hot potatoes" will have to be dealt with later on as a true negotiated bipartisan deal that isn't subjected to the coersion of a contrived government shutdown.

Let's hope the Republicans will focus on attaining compromises that are actually possible instead of busting themselves and the country in overreaching for things that are unrealistic given the limits of the hand they're playing.

"There's also the question of whether Mr. Obama is even capable—temperamentally—of negotiating such a compromise. He is so sure of his own superior political virtue that he disdains meeting other politicians halfway (foreign dictators perhaps excepted). We'll find out soon enough, but he can't say he wasn't offered the opportunity."

How true! When your background is community organizing, regardless of your education and degree, your first thought is opposition not negotiation.

Set up debt negotiations after Obamacare is really begining to come apart at the seams. By March 1, there will be MORE people uninsured than the previous year. Those who are insured will be paying more in premiums and more out of pocket than ever before. Negotiate over the dept limit THEN.

The Democrats are banking on the Republicans breaking ranks on the CR and trying to fight it out on the debt limit. Present the Senate and WH with a clean Debt Limit raise right now. Make it clear that the Budget, the Spending of the Government, is the RESPONSIBILITY of the House.

Make it clear to wishy-washy Republicans, who what to fight another day, that there is no other day.

"He is so sure of his own superior political virtue that he disdains meeting other politicians halfway" It seems to me he believes himself to be the 2nd coming of Jesus Christ in all matters, not just politics.

" The Ted Cruz Republicans would have to give up their mission to defund the Affordable Care Act with only one house of Congress. President Obama would have to show he's willing to negotiate with Republicans over the debt limit"

1. In case you missed it, the Republicans have offered CRs for delaying the individual mandate and dropping the congressional staffer's subsidy.

2. Obama's point here is to destroy the Republicans and Tea Party by shutting down the government, making it as painful as possible and blaming the Republicans. The goal - winner take all in 2014. Suggesting that Obama might be open to some reforms - well haven't we been there, done that?

WSJ has a penchant for attacking Cruz. Cruz is not the House. Time and effort would be better spent on the real problems here - Harry and Barry.

So the sage advice of the Wall Street Journal is that the Republicans should once again trade "short-term" spending increases (which ALWAYS become permanent) for "long-term" budget reforms (which NEVER happen)?

Why would this time be any different? Why would we finally get reform THIS TIME? What is different now that would ensure that, 18 months from now, we're not right back where we are, with Mr. Obama demanding yet another debt ceiling increase and the Wall Street Journal once again advising "short-term" spending increases for "long-term" promises?

With friends like the WSJ, who needs the Democrats! Pretty sure R's put up a CR with elimininating the medical device tax and postponing individual mandate a year. Nothing more. Rather highlight R offers the WSJ would rather pick on Cruz.

Out here in the real world, we see the D's starting to crumble. Reid is sounding like he is cracking. When put on the spot like CNN did and not having his prepared one liners, you see his true character and agenda.

The last thing O wants is a robust economy in his second term.He did not want that in his first term. He does not want everyone to have a chance at the American Dream. He wants everyone except for a chosen few of course to live the old Russian nightmare.

"But Mr. Obama is on record as favoring a cut in the corporate tax rate, "

And what exactly does that mean? Mr. Obama is also on record as being opposed to any increase in the debt ceiling, but that doesn't seem to mean anything these days.

Trying to use Mr. Obama's stated positions against him is a waste of time. They are just words he read from the teleprompter screen. It's highly doubtful that he ever even understood what he said, and even if he did, he surely doesn't remember it now.

"There's also the question of whether Mr. Obama is even capable—temperamentally—of negotiating such a compromise. He is so sure of his own superior political virtue that he disdains meeting other politicians halfway (foreign dictators perhaps excepted)."

No, there is no question, he doesn't have the temperament, much less the competence or care for his country.

Regarding "And the political irony is that instead of learning about the glitches and problems of the health law's rollout this week, the public is hearing only about the GOP willingness to punish other Americans to get rid of ObamaCare."

And what is contributing to this? The WSJ and other conservative media who prefer to trash the strategy with a barrage of stories like this, as opposed to supporting the defunding by exposing the glitches and problems.

no one, absolutely positively, wants a default. The treasury dept indicated today that it would unleash an economic crisis even worse than 2008-09.

However it is plain wrong to threaten a default in order to extract some negotiating concession, period. The republicans will have to climb down and any negotiation leverage they would have had over entitlement reform, long term spending balance etc. will have been completely evaporated by the use of bad-faith tactics to threaten economic disaster if they don't get their way.

A clean continuing resolution and debt limit extension would win a vote in the House if it came to the floor. But a few dozen tea-party nut-jobs are preventing the will of the majority from being done. And by the way, they got elected in gerrymandered districts - the democrats having won 1.5 million more votes for congressional seats than republicans. Is this legitimate? I think not. The republican party is about to be thoroughly humiliated and demoralized.

A Debt Limit fight will be taking place over a FULL shut down, no pay to the military, and a possible stock and bond market crash on threats of interest payment default. Another stock market crash with blame laid on the Republican intransigence. The Republicans will be rolled on a Debt Limit fight. The Republicans would be idiots to be drawn into that battle.

The Republicans could make funding the entire program contingent upon re-imposing the employer mandate in accordance with the law as written and removing the subsidy to White House and Congressional staffers. The Democrat Party will block that as well, but at least then they will be seen as blocking what they want, if only by those who obtain information from sources other than official Party agencies such as ABC, NBC, CBS, CNN, et. al.

The "go along to get along" wing of the Republican Party that kept it in almost constant minority status over the decades is alive and well. Most of the GOP leadership and much of the WSJ are members of this "ruling class" mentality.

No matter how much these ruling class types might have disagreed with Cruz, their very public attacks on their own Party member was an insight into the lack of principles that they hold WRT the Republican Party being an actual opposition party to the socialist tending Dem who are run by as radical a group of Leftists as they accuse Cruz of being on the right.

Watching the hapless GOP leadership stumble thru this particular mess is just another reminder of the truth of PJ O'Rourke's salient observation that the GOP is "The Stupid Party". When O'Rourke said that, he was NOT referring to the policies, but to the hapless leadership that the GOP usually parades out to battle with committed Democrats who are ALWAYS motivated by a burning leftist ideology to win.

If they weren't worried about the Tea Party, they wouldn't attack them. As Steve pointed out, their penchant for attacking and dismissing the Tea Party shows that they really do not want the true message of this faction reaching the voting public...

Because the message of lower taxes and fiscal responsibility is one that the majority of Americans support. And I know you will come back with the "2012 Election results." Fact is that Republicans own the house, which is the sign of majority in this country.

If Obama couldn't beat a Wall Street Private Equity Barron 4 years removed from our 2nd greatest financial crisis, which most of the voting public blamed on Wall Street, then he didn't deserve to run in the first place.

Funny how that potted plant, and the unimpressive Harry Reid, can run rings around the Tea Party leaders. That's an indication of just how pathetic the Tea Party really is. Other than the 2010 lightening strike, the Tea Party bungles everything it puts its hands on. Obama and Reid are so lucky they are not confronting establishment, Reagan Republicans. The Tea Party types must make them giggle.

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